Best way to save that isn't a savings account?

When I was younger I used to keep a big chunk of money in savings, but realized that's just giving away money to inflation because it's not earning anything. And before we go further, yes mtn I'm I'm putting in the max into the HSA and more than enough to get the match for the employer 401k 

So now that we are down to just the mortgage and a modest car payment, I want to get back to having more cash available (and to start saving up more to get a ridiculous car late this year or next year, house stuff, I don't think I want to commit to the HELOC just yet based on LTV ratios I'm not sure the house has gained enough equity to be worth it), but have it still earning some interest and be accessible unlike HSA/401k money. 

There are so many options I'm not sure where to start. I'm not looking to try to beat the market or anything, but a good place to save that won't languish like it does in savings, and that I can still have relatively quick access to in the case of buying a car or dealing with a house emergency. 

I'm completely ignorant in this arena.

To follow up, the house was refinanced below 3% and I just refinanced the Mazda 3 to near 2%. So while I theoretically could start making quadruple/quintuple payments on it, with the interest that low and inflation so high, it doesn't seem like the best play.

Fidelity/Vanguard investment account.

Bouillon of your preferred flavor. Physical, not on paper.

Depends a lot how much risk you are willing to take and what the time horizon is. If you can't take any further risk other than inflation and/or are dealing with short term (< 5 years) needs, you're pretty much stuck with FDIC/NCUA insured savings or money market accounts. Those are also IMHO the only true, "need money almost right now" emergency type funds if that's important.

I have some of my "savings" parked in the Wellesley Income mutual fund, plus some short and medium term bond funds. While that's pretty low risk, the bond funds have been taking a beating  recently so at least for the last 6+ months, I would've been better off in a savings account. However in the longer run, this combo should produce a better return than a savings account.

Brokerage account.  Index fund.

ProDarwin said:

Fidelity/Vanguard investment account.

 

 

I use Fidelity for several different types of accounts.  Been quite happy with them.  I can see and manage all my stuff online using their website. 

Yup. If it's got to be accessible at any time without delay, then you're pretty much stuck with a savings account. A quick googling shows you can get up to 0.5% interest (woop dee doo!).

If you can deal with some potential delays, and potential losses then a regular brokerage account is the way to go.

How much notice do you need before taking the money out? If it is a week or so, index fund (or stocks of your choice) in a brokerage account. If you need it immediately, checking account or savings account is unfortunately your only realistic option. 

https://www.nerdwallet.com/best/banking/high-interest-accounts

The question is how liquid does it need to be?

With a brokerage account you can get money out fairly quickly.  I would argue any time you need 5 figures worth of money, you can wait a day or two, because those types of purchases typically arent cash.  With the exception of ransom.

We stash most of our money beyond our "Bi-annual Property Tax/Emergency" fund in Vanguard, mostly in VTI (Total Market ETF), but with some in Growth ETF as well. It's obviously subject to market changes and could end up worth less than what we put in, but for the most part that's money we're not expecting to "need" anytime soon, either - fund for the next house, or a next car, etc..

Like others here, ~$10k in savings/money market to be able to access immediately, the rest is tossed into a Vanguard brokerage account dumped 100% into an index fund (specifically VIGAX, but the standard disclaimer of I'm not affiliated with Vanguard, nor do I know what I'm doing.  Your mileage may vary, wear eye protection, this recommendation is known to cause cancer only in the state of California, etc.).

Have you thought about stocking up on parts for cars you don't own? I am heavily diversified in cabin air filters.

Seriously though, the various savings and investments are all sound advice. There really isn't a great answer right now. I have been taken to buying hobby items as they come out and gotten pretty good at flipping them for more. I have a friend that invested in resin 3D printers and has a pretty substantial income now making parts on them. 

STM317 said:

Yup. If it's got to be accessible at any time without delay, then you're pretty much stuck with a savings account. A quick googling shows you can get up to 0.5% interest (woop dee doo!).

There are strategies involving staggered CDs (certificates of deposit).  Divide your savings into 6 chunks, and every month use one of them to buy a 6 month CD.  You're never more than 1 month away from a CD maturing and having access to that month's cash.

I have no idea whether or not CD rates are enough higher than normal savings accounts right now to make this worth the effort or not.

In reply to codrus (Forum Supporter) :

I've looked into this, but short term CD rates are pretty dire as well right now and IMHO not enough to lock up money for longer. But they're definitely a way to preserve nominal capital that the other riskier options don't necessarily offer.

ProDarwin said:

The question is how liquid does it need to be?

With a brokerage account you can get money out fairly quickly.  I would argue any time you need 5 figures worth of money, you can wait a day or two, because those types of purchases typically arent cash.  With the exception of ransom.

Oh it would never need to be RIGHT NOW. But maybe within a week or so? My credit cards are all 0 balance and between the 3 I think I have $70-75k in limit.......so I have more than enough for any kind of emergency. 

My 401k is already through Fidelity, do you guys think it best to just open a separate account there and move forward that way? 

BoxheadTim said:

In reply to codrus (Forum Supporter) :

I've looked into this, but short term CD rates are pretty dire as well right now and IMHO not enough to lock up money for longer. But they're definitely a way to preserve nominal capital that the other riskier options don't necessarily offer.

Yeah, last time I looked (about a year ago or so), CDs weren't really much better than any other savings account, which was darn-near "shove it under the mattress instead" levels of intrest rate.

Javelin said:

Have you thought about stocking up on parts for cars you don't own? I am heavily diversified in cabin air filters.

When I got into Datsuns in 1980 I should've stocked up.   
 

Oh I forgot, I have another short-term option since I don't plan on doing anything with in the next 6 months. Our ESPP (Employee Stock Purchase Plan). I can put up to 10% of my salary from April 1 to Sept 30 in to the fund. On Sept 30th, the full amount will be used to buy company stock at a 5% discount which I can immediately cash out/keep/etc. 

Beanie Babies........

how many people used retirement money to "invest" in collectibles ?

my friend made a lot of money selling stuff to these "investors"

I've got a chunk of cash as my "fun money savings" in my day to day bank. If I want a new laptop or racecar parts or whatever, I pull from that and it gets auto-replenished every paycheck.

Then I've got a bigger emergency fund in a high-yield savings account ("high yield" being relative, it's like 0.5%) that I don't see when I log in to my main bank website. Out of sight, out of mind, I don't spend it, but it's there and accessible relatively quickly and not subject to any market fluctuations.

Beyond that cash, I've started buying in to various index funds. I just use the same people who manage my company's 401k as they're one of the big names and I like having every investment-related thing on the same website for ease of access. I'm not looking to buy a house anytime soon, so having a zillion dollars in a HYSA making like $8 in interest isn't helpful for me.

z31maniac said:

ProDarwin said:

The question is how liquid does it need to be?

With a brokerage account you can get money out fairly quickly.  I would argue any time you need 5 figures worth of money, you can wait a day or two, because those types of purchases typically arent cash.  With the exception of ransom.

Oh it would never need to be RIGHT NOW. But maybe within a week or so? My credit cards are all 0 balance and between the 3 I think I have $70-75k in limit.......so I have more than enough for any kind of emergency. 

My 401k is already through Fidelity, do you guys think it best to just open a separate account there and move forward that way? 

It sounds like you and I are in similar financial situations.

For me, my credit card is my cash reserve (one month access to 50K at zero interest) and whatever cash I have on-hand gets thrown towards paying down debt.

I owe 32K to the penny on my mortgage (3.625% 30 year fixed) and ~6.5K on a car loan and about $250 on my credit card.  My eldest daughter will be starting college this September and I'm on track to be debt free by then.

BTW, I had a one hour call with a Fidelity financial advisor last week.  She had good qualifications, was well spoken, and advised me that I was making a mistake to not have "three months of cash reserves on hand".

I would have received the exact same advice 30 years ago and had I taken it then, I'd be $535,000 poorer today.  Do the math, three months thirty years ago was 10K, three months today is 30K so the average of 20K compounded at 12% annual growth for thirty years is $535,000.

Not to disparage Fidelity but my financial advisor wasn't a Fiduciary, kept moving me towards annuities / heavily managed mutual funds (1.2% to 3.0% annual management fees) and even their calculator was wildly biased as I only had three scenarios to pick from (the market does much worse than average, worse than average, or average during my retirement years).  Give me a break, that's obviously a tactic to draw me into ridiculously expensive "safe' investments...how about a simple 90% confidence interval.

Anyway, screw the "experts"...we're so far ahead of where we'd be had we listened to them our whole life that we can afford to continue to be aggressive.

Pay off your debt and use your credit cards for emergency cash.

I have some squirreled away with a broker.  Primarily safe stuff, but he moves it around and he's doing quite well with it.

You can have the best of both worlds if you ask about a Margin account.  I don't have one anymore, but it basically works like a credit card backed by your investments.  It's not for the faint-hearted or those with poor impulse control, but a general way of thinking about it is that you can have up to about half of your assets in liquid form at any time.  Let's say you send a broker $50k to invest.  They'll issue a credit card with a $25k limit.  You are borrowing (with interest of course) against your holdings.

The upside is that you have instant access to half of the monies which are otherwise stuck behind days of paperwork to make liquid... and which would be taxed on any gains you've accrued.  The downside is that there is obviously risk.  If the holdings you have behind the loan you just took depreciate, you have less margin, and less value to cover it.  Say you have $50k in holdings, a 25k margin, and you spend $20k because your roof collapsed.  Then your stocks take a nose dive for a week and they're only worth $36k.  Then you get a margin call because your loan is larger than half the holdings that back it up.  You'll have to sell enough stock to take your loan to a balance of $18k or less.  You have now sold depreciated stock and lost money.

I used mine very sparingly.  I had the option of applying my dividends and interest to my balances which often covered my purchases.  Kinda free money other than the future interest I lost by not rolling those dividends into more investments.  If you set it up properly, it can be a very helpful tool.  I have a savings account at the same bank where my mortgage is primarily because it just auto-drafts and I can't miss a payment... but I'm currently talking with my broker about moving that savings to the brokerage account.  He's crunching numbers and thinks that with the increased balance I can make almost as much in monthly growth as my tiny mortgage payment ($354) making it essentially a free house (at the expense of not gaining as much wealth as quickly in the brokerage account).

Long story short, it's an investment account where you can use some of the money without liquidating anything.  The money is still in the background earning you wealth, yet still available in your pocket on plastic.

My only advice on investing in the market is to choose the broker, not the firm.  I've been with the same broker for 25 years and he's been with 4 different firms.  There is nothing about the bank that makes the investments better or worse, it's the human you choose and their brain that does the work.

RX Reven' said:

z31maniac said:

ProDarwin said:

The question is how liquid does it need to be?

With a brokerage account you can get money out fairly quickly.  I would argue any time you need 5 figures worth of money, you can wait a day or two, because those types of purchases typically arent cash.  With the exception of ransom.

Oh it would never need to be RIGHT NOW. But maybe within a week or so? My credit cards are all 0 balance and between the 3 I think I have $70-75k in limit.......so I have more than enough for any kind of emergency. 

My 401k is already through Fidelity, do you guys think it best to just open a separate account there and move forward that way? 

It sounds like you and I are in similar financial situations.

For me, my credit card is my cash reserve (one month access to 50K at zero interest) and whatever cash I have on-hand gets thrown towards paying down debt.

I owe 32K to the penny on my mortgage (3.625% 30 year fixed) and ~6.5K on a car loan and about $250 on my credit card.  My eldest daughter will be starting college this September and I'm on track to be debt free by then.

BTW, I had a one hour call with a Fidelity financial advisor last week.  She had good qualifications, was well spoken, and advised me that I was making a mistake to not have "three months of cash reserves on hand".

I would have received the exact same advice 30 years ago and had I taken it then, I'd be $535,000 poorer today.  Do the math, three months thirty years ago was 10K, three months today is 30K so the average of 20K compounded at 12% annual growth for thirty years is $535,000.

Not to disparage Fidelity but my financial advisor wasn't a Fiduciary, kept moving me towards annuities / heavily managed mutual funds (1.2% to 3.0% annual management fees) and even their calculator was wildly biased as I only had three scenarios to pick from (the market does much worse than average, worse than average, or average during my retirement years).  Give me a break, that's obviously a tactic to draw me into ridiculously expensive "safe' investments...how about a simple 90% confidence interval.

Anyway, screw the "experts"...we're so far ahead of where we'd be had we listened to them our whole life that we can afford to continue to be aggressive.

Pay off your debt and use your credit cards for emergency cash.

I know from previous monetary discussions, you have been much smarter with your money than I was. I think about all the money I spent on cars/booze/going out/vacations through my 20/30s (I turn 40 this Sunday) I'd probably have well in excess of the "3x your yearly income in your 401k at 40" vs the 1x amount. 

Any suggestions on being able to find a good fidiciuary? 

I use Etrade and an assortment of funds. Emergency funds are MC and Visa, as well as a line of credit secured by my brokerage account.